Iraq has considerably increased overseas dollar transactions through the official global SWIFT system amid a booming currency black market, the vice governor of the Central Bank said on Monday.
Baghdad has imposed restrictions on the use of American dollars domestically and the banking sector at the end of 2022 adopted the international financial message system, SWIFT, as part of reforms to combat money laundering and to adhere to international sanctions.
Iraq has foreign currency reserves of more than $100 billion but analysts say tax evasion, the black market, and dollar smuggling to countries under US sanctions, mainly Iran, have raised the demand for foreign currencies.
Transactions through the Central Bank’s electronic platform, which ensures compliance with SWIFT, have increased considerably, the bank’s vice governor Ammar Khalaf told AFP.
“At the beginning of 2023, transactions were at $50 million per day,” he said. “Now, we have around $200 million, which is consistent with the size of Iraq’s economy.”
Iraqi banks seeking to access dollar reserves in the United States must make transfers through the electronic system. The US Federal Reserve will examine the requests and block them if they consider them suspicious.
The official exchange rate is set by the government at 1,320 dinars to the dollar but the dollar has been trading at 1,470 per dollar at unofficial markets.
Prime Minister Mohammed Shia al-Sudani admitted last year that sanctions preventing dollar transfers to Iranian banks had caused Iraqi traders to turn to the black market.
In late November, the government announced steps to encourage importers of goods like cigarettes, cars, gold, and mobile phones to use official channels to obtain dollars.
Iraqi authorities have banned more than 20 Iraqi banks from carrying out dollar transactions as part of US regulations on sanctions and against money laundering.
Khalaf said Baghdad was in “constant contact with the American Treasury” to try to lift the ban.
The banned banks are restricted from dealing in dollars but can conduct local transactions.
